A Sampling of Advisory Opinion

By

Anita Peltonen

Updated Nov. 22, 2004 12:01 a.m. ET

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Principles of the Stock Market P.O. Box 1236, New Paltz, N.Y. 12561 NOV. 17 - With inflation on the increase, there's not much doubt that the Fed will continue to proceed with its one-after-another interest-rate hikes. The Fed will raise short-term rates to try to keep longer-term inflation expectations from getting out of hand.

We'll be able to see how successful the Fed is by watching how the 10- and 30-year Treasury bonds act. As the financial markets discount the future before we understand the reasons why, it's sensible that these two bond benchmarks stopped rising in price, falling in yield, back in late October -- just about the time stocks started their sharp price rise. Obviously, big money was shifting or reallocating from bonds to stocks. Bottom line, if you haven't started making that shift as well, from bonds to stocks, I would recommend you start.

-- Richard Schwartz

Yamamoto Forecast P.O. Box 573, Kahului, Hawaii 96733 NOV. 17 - We predicted President Bush's re-election victory. Our next call is that a honeymoon period between the president and Wall Street will propel the equity market higher in the following months. We intend to use this time to eventually exit the market at escalated heights. But, for the moment, let's enjoy the party. You can call us a bull for the next two to three months. And a bear for the two to three years after the next 60 to 90 days. Foreseeable gains now with stocks: 100%; cash: 0%. But we don't feel the market's in a bull cycle. Not even close to one. It's our contention we're in a bear market. Still, in a bearish phase, significant advances do occur...We envision a market peak later this year or sometime in early 2005.

On the business front, the figures have been contradictory...On the one end of the spectrum, retail sales leapt 1.5% in September. The third-quarter gross domestic product grew at a 3.7% rate. And October's employment figure shot up by 337,000. However, the Conference Board's Index of Leading Economic Indicators dropped 0.1% in September, following declines of 0.3% and 0.1% in August and July, respectively. Yet in September, payrolls grew a paltry 96,000.

So which way is the economy heading? The answer lies with the direction of oil...when energy prices fall, stocks go up. When the price of the commodity increases, equities decline. You can take [that] formula to the bank...The retracement in energy prices...could be temporary. But there's ample time for traders to move the financial markets up before the supply-and-demand elements return...In addition to strong demand for the product [from] China], refining capacities are limited and no major find of reserves has been discovered for [many] years.

-- Irwin Yamamoto

Maxim Group 405 Lexington Ave., New York, N.Y. 10174 NOV. 16 - We are above the 200-day moving average for the first time since July. This indicator is quite significant for some funds that use it as their 'line in the sand.' They cover shorts above it, and sell stocks they dislike below it. It is always healthier when the indexes trade above it.

The indexes have taken out several previous highs, further adding to the bullish tenor of the markets. First, we are above the Jan. 1 levels. Secondly, the [Standard & Poor's 500 Index] has surpassed the post-9/11 highs; the Dow and Nasdaq are 1% away. If and when all three major indexes are above that level, it will represent an important psychological gain, revealing strong positive sentiment.

Finally, many of the negatives we have been watching are no longer pressuring investors. The election is resolved, oil is off its highs, the conventions and Olympics went off without incident. Even Iraq, (which we still believe to be a debacle) is [not always on] the front page. We advise using weakness to add to positions.

-- Barry Ritholtz

Brown Brothers Harriman Technical View 59 Wall St., New York, N.Y. 10005 NOV. 15 - On a sector basis, the Utilities SPDR fared the best [the week before] last, gaining 3.3%. The SPDR has been in a well-defined bullish trend for over two years, and we believe it continues to carry a positive technical profile, and will continue to lead the market higher. [Select sector SPDRs are exchange-traded funds that divide the S&P 500 into nine sector index funds.]

The Auto Components Index moved out of the Worst of the Worst, as the index broke above its 2004 downtrend line. In our view...the sharp underperformance seen so far in 2004 is ending, but not enough evidence [indicates] a new upturn has begun.

On a relative basis, the Food & Staples Retailing Index has broken its 2004 downtrend, while relative momentum has moved back to a buy signal. Longer-term, we believe the multi-year relative downtrend is in the process of reversing.

We recommend investors keep an eye on the pullback in the relative-strength line for the Oil & Gas Index because relative momentum has now turned to a sell signal for the first time since late-2003. Relative to the S&P 500, the index has pulled back to its dominant trendline, and a potential breach would change the year-long pattern in the index relative to the S&P 500.

-- Andrew Burkly

Lord Abbett Economic Insights 90 Hudson St., Jersey City, N.J. 07302 NOV. 15 - It's tempting to [see] the president's plan to privatize part of Social Security as an answer to longer-term budget strain, but that would be a mistake. Privatization would, in fact, intensify those financial strains.

Sure, allowing people to withdraw a portion of their Social Security payroll withholding (FICA) in order to establish a private retirement account might put future pensions of future generations on firmer financial footing. But in the intermediate term, withdrawal of these funds would weaken the government's ability to meet the financial strains imposed by retiring baby boomers. Any effort, then, to maintain pension and medical benefits would fall on other government tax revenues or add to the national debt.

Whatever these intermediate-term budget strains, financial markets should welcome this reform [since] these new private accounts would doubtless flow into stocks and bonds. But even in such a generally positive milieu, the prospect of privatization is not all wine and roses for stocks and bonds. Much will depend on how such a scheme is implemented. Although it's impossible here to consider all the ins and outs of every potential privatization scheme, there are a few general issues on which it is possible to comment.

One critical pass on which markets might hinge is how the eventual scheme, if one passes, treats the tradeoff between the risk of loss on the one hand and individual freedom to invest broadly on the other...

Investment novices could squander these new accounts on poor investments unless they are constrained. [But] a highly constrained investment program has its own drawbacks. Because Social Security flows are huge, even by U.S. financial market standards, focusing investment choices too narrowly could swamp the market's ability to arbitrage and thereby cause market distortions. How Washington deals with these tradeoffs will affect the market's ultimate response. Meanwhile, markets doubtless will swing widely as the debate proceeds and various 'solutions' gain ascendancy.

-- Milton Ezrati

MacroMavens 4 Columbus Circle, New York, N.Y. 10019 NOV. 15 - Lent Up? According to the Fed's Senior Loan Officers Survey, consumer demand for loans (mortgage and non-mortgage) slowed sharply in the latest quarter. Indeed, non-mortgage loan demand is now at its lowest level since the 2001 recession. To the extent that debt is the engine of consumption, can a slowdown in spending like we saw then be far behind??

-- Stephanie Pomboy

Marder on the Market Ladenburg Thalmann Asset Management 590 Madison Ave., New York, N.Y. 10022 NOV. 15 - Stairway to eleven: We remain very bullish. Both the averages and leading stocks continue to act quite constructively, as more and more institutions put money to work. Shares spent the first three days of last week moving sideways as they digested the prior week's gains before forging ahead on Thursday (Nov. 11) and Friday (Nov. 12). In particular, Monday (Nov. 8) and Tuesday (Nov. 9) saw very little motivation by institutions to take profits, despite the recent gains. The tight price range and volume dry-up seen on these days was a textbook example of how an emerging advance should unfold. The Nasdaq did log one distribution day in Wednesday's (Nov. 10) session, but the selling was trivial in the wake of three weeks with no distribution days. The situation was similar on the S&P 500. Volume dried up for most of the week as the average moved sideways with narrow intraday price ranges.

When discerning the market's message of the economy's direction, we look at the bond market in addition to charts of the retailers, techs, builders and other 'econo-sensitive' segments. We like to key on the retail sector, given that it accounts for 50% of consumer spending, or one-third of U.S. economic growth. Confirming what the market has been saying for several weeks, retail sales recorded a 0.9% gain in October versus Street expectations of 0.6%, excluding autos...We believe the retailer-charts' message is that the holiday shopping season will be good.

-- Kevin Marder

Repex Market Comments 550 Durie Ave., P.O.B. 577, Closter, N.J. 07624 NOV. 15 - Until the Fed achieves neutrality in its monetary policy, which we guesstimate at somewhere around 3% or 3.5%, there will be excess money floating around that will be chasing available investments. Even as interest rates trend higher, at an indicated "measured pace" of &frac14;% increments, that should be more than offset by the excess liquidity and still accommodative Fed monetary policy, a positive for financial markets for the short and intermediate term, until such monetary neutrality is reached.

We expect to see buyers at the gates on modest pullbacks. Stocks with potential for growth for patient investors: American Express, Cerner, Edwards LifeSciences, JPMorgan Chase, Manhattan Associates, MedImmune and Shaw Group.

-- David Sokolower, Erich Sokolower

John Magee Technical Analysis Box 88, San Geronimo, Calif. 94963 NOV. 10 - Capital crime: George II was reselected less than 48 hours before he had upset fiscal conservatives, saying that he had earned capital in the election and intended to spend it. That is known as a capital crime. What happens to people who spend their capital is their kids wind up in shirtsleeves ("shirtsleeves to shirtsleeves in three generations," for those of you born after 1975)...The market just did such a squirrel number you wouldn't believe. Or, as it were, squirrel bait on a bull trap. Dear readers there is no bottom on the bear market (gentle, soft, endlessly seductive) begun in February.

-- W.H.C. Bassetti

First Global Markets 3 Neptune Rd., Poughkeepsie, N.Y. 12601 NOV. 1-12 - The U.S. has been able to consistently run 'unsustainable' current-account deficits only because the rest of the world was willing to fund these. The dollar's status as virtually the only safe-haven currency of size has been unchallenged for decades. That is now undergoing a definite change. The euro has finally become a viable alternate 'store of value' and 'standard of value' for the world. For a variety of economic agents, from central banks managing forex [foreign-exchange] reserves to corporate treasurers to exporters in various countries, the euro is increasingly fulfilling the role that was envisaged for it when the common currency was mooted-as an alternate 'global' currency.

So with an alternative-currency investment option, the world finally has a way to penalize the U.S. for running unsustainable deficits. The funds can actually move elsewhere...something which was more of a theoretical possibility earlier...We suspect the global-investor community likes the idea of a counterweight to the dollar.

-- Devina Mehra, Shankar Sharma

Harloff's Intelligent Fund Investor 26106 Tallwood Dr., N. Olmsted, Ohio 44070 NOV. - Now that the oil supply appears more certain and China is slowing its growth engine, there is less oil demand and we think oil-related stocks will no longer lead.

There are signs that large institutions are finally starting to invest in equities. These signs include: rising bond yields, rising Dow prices and increases in many of the broader indexes. Our timing models ... are bullish for the S&P 500, NDX [Nasdaq 100], gold, and remain bearish on 10-year bond yields. Our graphs for support and resistance for the S&P 500 and NDX illustrate a strong stock market.

President-to-be Spitzer is still going after bribery and illegal activity in the insurance and brokerage communities. This is a reality check for many. Do you know why your insurance or stockbroker sales agents are recommending certain products?

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